Despite a challenging economic environment, IndusInd Bank exopects to continue its strong growth momentum that it saw in the second quarter. On the sidelines of the company?s quarterly results, Romesh Sobti, the managing director and CEO of IndusInd, spoke on range of issues including the asset quality and margins. Excerpts
Do you expect loan growth to accelerate in the second half of the year? What is your loan growth target for the year?
Last two quarters we have grown around 30%, and we expect to sustain this trajectory because we are seeing robust demand on the consumer finance. We are also seeing very good demand on the vehicle finance side. We improved our market share in every vehicle category. We have seen vehicle financing grow at 40% for two consecutive quarters.
NPA has grown slightly in this quarter? Will we see NPAs rising further?
For us, NPA does not matter, cost of credit matters. Our cost of credit last year was 40 basis points, a year ago it was 61 bps. Our budget for cost of credit is 50 bps and we are already below this. We hope to keep it at that. There is nothing in the book to show that asset quality will further deteriorate.
What sort of levels can we expect to see your margins at?
Clearly, cost of deposits is falling ahead of the lending rates drop. And 52% of our book is retail and that book has fixed rate at around 16%. even as rates drop, these fixed rates will not drop, lending rates will remain the same even as the cost of deposits falls. So we expect repricing to happen on the deposit side, which will assure interest margins inching up again. The direction that we expect in the next two quarters is expansion in margins.
Do you expect to raise more capital this fiscal?
We have a high threshold in capital adequacy and we do not want to fall below that threshold. We are getting quiet close to that threshold, so certainly there is a thinking in the bank on when to raise capital. There are indications that we would want to raise capital within the fiscal. That is a growth capital. We continued to grow at 25-30%, we have seen this sort of growth for the last 18 quarters now. We expect to keep that trajectory. Keeping that in mind we want to raise enough capital now. We will raise the capital purely through equity.
Will we see Base rate cuts by IndusInd Bank?
Base rate is one aspect the margin on the base rate is the other part. You could see reduction in lending rates without base rate going down. If the Reserve Bank of India takes action on CRR, there is a very good chance that banks could cut base rate.
